Home prices keep
surging

While many say Oahu's residential real estate market is showing signs of cooling, demand was still hot enough last month to spark record highs for asking prices and sales prices of single-family homes.

The median asking price of single-family homes climbed in October to $675,000, a year-on-year gain of 22.7 percent. Meanwhile, the median resale price of a single-family home on Oahu rose 21.5 percent to $485,000 last month, according to monthly sales data from the Honolulu Board of Realtors.

Home resale prices edged above the last high of $481,800, set in June.

October's condominium resale prices dropped slightly to $218,000 from September's record high of $219,000, but the prices were up 17.8 percent from a year ago.

While the market has come down from the frenetic buying pace seen this summer, when homes sold in the blink of an eye and often for more than the asking price, fall is trending strong, said Judith Kalbrener, president of the Honolulu Board of Realtors.

"There's still a lot of demand in our marketplace," Kalbrener said. "I think prices will continue to go up, just not as fast."

Buyers, who are concerned about rising interest rates and prices, have continued to propel the market even in what is traditionally a slower season, said Harvey Shapiro, research economist for the board.

"People might be expecting rates to increase, so they want in," Shapiro said, adding that interest rates have increased three times since June, with a fourth hike expected in a week or two.

Second-home buyers looking for alternative investments to the stock market also kept sales strong in October, with the trend expected to continue into the holiday season as more visitors begin arriving in Hawaii, said real estate analyst Ricky Cassiday, president and owner of Data@Work.

"People want to talk like it's the top of the market, but it's going to move higher until prices dampen people's desire and ability to buy," Cassiday said.

An improved economy, lower mortgage rates and better financing has made homes more affordable to Hawaii residents than they've been in the past, Shapiro said.

"The ability of families to purchase homes is better now than at anytime since the 1980s, he said. While buyers in the 1990s had to spend 60 percent of their income to buy a home at the median price, today's buyers spend about half that amount. While prices are increasing, they won't harm the market for some time to come, Shapiro said.

"Our prices have a lot of room to grow as compared to other markets," he said. "But you'd be surprised. It isn't all mainland and foreign investors buying homes. Lots of Hawaii residents have made money in this market and they are moving up."

Buyers signed sales contracts for 441 single-family Oahu homes in October, a year-on-year increase compared to the 380 homes sold in October 2003. While fall is traditionally a slower period, October sales were second only to July, which recorded 467 single-family home sales and 776 condo sales.

Condo sales had gained pace earlier this year after high single-family home prices forced some buyers to turn to more affordable condos, but condo sales slipped last month to 665 compared to 669 the previous October. It was the second year-on-year decline for condos since October 2001.

The number of homes on the market has risen in recent months after bottoming out in May. A growing number of homeowners have tried to cash in on high prices out of fear the market might soon run out of steam. A resulting increase in inventory and time on the market helped buyers fight back by giving them more leverage.

Inventory remains tight, but there was slightly more selection for buyers last month, with 1,189 homes and 1,739 condos available, compared with 1,180 and 1,699 available in September, respectively.

Properties also sold at a slightly slower pace. Single-family homes spent a median 29 days on the market and condos spent 24 days on the market, which are historically low figures but up from midsummer record lows in the mid- to high teens.